When it comes to investing, there is no “sure thing.” Our world is dynamic and ever-changing, and there are always risks and unknowns. Sometimes the uncertainties pile up and overwhelm investors. This feeling is not uncommon and, in fact, quite normal.
So, while investors don’t have access to a crystal ball to foresee the ultimate path of interest rates or provide definitive answers regarding the impact of new economic policies, they do have a choice in how they behave in the face of uncertainty. Don’t let the fear of the unknown keep you on the sidelines or goad you into bad decisions. Here are a few tips to help manage uncertain times:
- Don’t Panic – It Never Pays: Stocks and bonds never move in a straight line, and investors must accept that there will be periodic pullbacks and periods of turmoil. Uncertainties and uncommon events often incite emotional investing decisions that can have destructive ramifications on returns and long-term investment objectives. In fact, there’s an entire field of Behavioral Economics that studies the effects of psychological and emotional decision-making.
We know that the urge to sell stocks is strong during times of tumult. Conversely, investors often don’t have the stomach to buy after the market plummets and losses are fresh in their mind. To put it simply, we are hard-wired to buy high when everything feels good and sell low when times look bleak. This is the exact opposite of what investors should be doing. Above all else, it’s important for investors to stay calm and avoid this common pitfall.
- Stick to Your Plan: To deal with uncertainty and even prepare for market volatility, consider working with investment and tax professionals who can provide objective guidance. It's hard to be dispassionate about your own money, but these professionals can help you maintain the discipline necessary to stick to your plan in times of uncertainty.
- Define your long-term investment goals
- Determine your true risk tolerance
- Build a diversified portfolio designed to keep you moving toward those goals
It's important to revisit this plan periodically to make sure your allocation is still appropriate and that your portfolio's expected return remains realistic. Reassessing and adjusting your asset allocation is critical as interest rate cycles, inflation trends and life circumstances change over the years.
If you don't already have a plan, there's no time like the present. Together with a financial professional, you can:
- Consider an Automatic Investment Plan: Admittedly, having the discipline to stick to your plan is not easy in times of uncertainty. Fortunately, there are strategies designed to help remove the temptation for emotionally driven decisions. One of the best approaches, in our opinion, is to consider an Automatic Investment Plan (AIP)1. An AIP enables you to invest a set amount every month and avoid timing the market. The fancy term for this is dollar-cost averaging. The simple reality of this is that it takes emotional decision-making out of the equation and can keep you on track with consistent contributions into your portfolio. It also helps you take advantage of the power of compounding interest2.
Our live U.S.-based Wealth Specialists are available to guide you in times of uncertainty. Call us at 1-800-235-8396 for a personalized investment recommendation at no additional cost to you3.
1Automatic investment plans do not assure a profit or protect against loss in declining markets.
2Compounding results from the return on an investment that is added to the principal balance. It’s the return you earn on your investments’ returns.
3Victory Capital Management Inc. (“VCM”) may provide you an investment recommendation. You are not obligated to follow any recommendation we provide you. If you do implement a recommendation, you may incur initial fees such as commissions or sales charges. You may also pay ongoing fees such as fund management fees and operating expenses. When we provide you with a recommendation, we have to act in your best interest and not put our interest ahead of yours. At the same time, the way we make money creates some conflicts with your interests. Please consult VCM’s Customer Relationship Summary for more information.
